Health Savings Accounts (HSA’s) & High Deductible Health Plans (HDHP’s)
High Deductible Health Plans (HDHP’s) are designed to accompany Health Savings Accounts (HSA’s). Under this arrangement, you can combine the benefit of a lower monthly cost from a high deductible health plan, with the benefit of a savings account that is designed to accumulate funds to pay your deductible. For example, assume you purchase an HDHP that has a $2000 deductible. After the deductible, the health plan pays 100% of all expenses. You can combine the HSA with the HDHP. Under HSA legislation, you can fund the HSA on a pre-tax basis. You can fund the account monthly, quarterly, or annually. The funds in the HSA account are meant to cover expenses that apply to your deductible. So, essentially, you pay your deductible with pre-tax, rather than after-tax, dollars.
The funds that are in an HSA are designated for medical and dental use only. If you use the funds for any other type of purchase, you WILL be assessed a 10% penalty on the use of the funds. This provision is similar to IRA provisions. If you have an HSA with an account balance, and you reach the age of 65, you can withdraw the funds and pay ordinary taxes, but no penalty applies.
If you enroll in an HSA as a single, your HDHP WILL NOT cover any medical or prescription costs until you satisfy the deductible. After the deductible has been satisfied, your HDHP will either cover 100% or some other agreed-upon percentage. If you enroll as a family, you must completely satisfy the family deductible before your HDHP pays ANYTHING. Normally the family deductible is equivalent to two (2) individual deductibles. For example, an individual might have a $2000 deductible; a family would have a $4000 deductible before the underlying insurance pays anything. After the HDHP deductibles and out of pocket maximums have been met, the health plan pays 100% of additional medical expenses.
Rationale for HSA Style Health Plans
If the funds in an HSA are your own, you will be more prudent in how you use your own money. If the doctor suggests an MRI, one of the first questions you might ask is; ‘how much does it cost?’ and ‘who can offer me the best price?’. This is exactly the type of consumer behavior HSA’s are designed to encourage. HSA’s are designed to encourage more prudent shopping of medical and dental services. As more consumers embrace the HSA model, it is felt this may have a dampening effect on the inflation in medical pricing. For more information click here to email us.
Of course, you can always choose one of the plans and options in our offer. The point of our program is that you can accumulate the money you haven’t spent. This is the option for those who didn’t use them at all. So as you can see, we are very flexible because life is hard in these days and we are here for you.